Gold price

Buy City Union Bank, target price Rs 218: HDFC Securities

Sep 23, 2022

Synopsis

City Union Bank Ltd., incorporated in the year 1904, is a banking company (having a market cap of Rs 9854.97 Crore).

Promoters held 0 per cent stake in the company as of 31-Mar-2022, while FIIs owned 18.12 per cent, DIIs 41.22 per cent.
Smart Talk

Securities has buy call on City Union Bank with a target price of Rs 218. The current market price of

. is Rs 132.75. Time period given by analyst is one year when

Ltd. price can reach defined target.

City Union Bank Ltd., incorporated in the year 1904, is a banking company (having a market cap of Rs 9854.97 Crore).

City Union Bank Ltd. key Products/Revenue Segments include Interest Discount on Advances Bills, Income From Investment, Interest On Balances with RBI and Other Inter-Bank Funds and Interest for the year ending 31-Mar-2021.

Financials For the quarter ended 31-03-2022, the company reported a Standalone Total Income of Rs 1252.87 Crore, up 4.82 % from last quarter Total Income of Rs 1195.24 Crore and up 11.72 % from last year same quarter Total Income of Rs 1121.43 Crore. The bank reported net profit after tax of Rs 208.96 Crore in latest quarter.

Investment Rationale Despite a higher credit cost (~1.8% annualised), City Union Bank’s (CUBK) Q4FY22 earnings were 8% ahead of our estimates on account of higher recoveries from written-off accounts and lower employee costs. Net slippages significantly moderated to ~0.1%, led by highest-ever recoveries (1.5% annualised), driving down GNPA to 4.7%. The total stress pool (NNPA + restructured + SR + SMA-2) stood at 9.8% (Q3FY22: 11.5%). Loan growth surprised positively (+11% YoY), led by growth in gold and corporate segments. On the back of healthy repayment trends and a highly-secured loan book (99% of loans), the management has guided for higher recoveries and lower credit costs. Credit growth is likely to clock a low-to-mid teen growth, with deployment opportunities visible in the non-gold loan portfolio. The bank remains on target to achieve 1.5% RoA by H2FY23. The brokerage raises FY23/24E earnings marginally to factor in stable opex and lower credit costs. Maintain BUY, with a revised target price of INR218 (2.1x Sep-23 ABVPS).

Promoter/FII Holdings Promoters held 0 per cent stake in the company as of 31-Mar-2022, while FIIs owned 18.12 per cent, DIIs 41.22 per cent.

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